Software guru McAfee says to seek asylum in Guatemala

GUATEMALA CITY (Reuters) – U.S. anti-virus software guru John McAfee, who is on the run from police in Belize seeking to question him in a murder probe, has crossed into Guatemala and said on Tuesday he will seek political asylum there.

McAfee has been in hiding for three weeks since police in Belize said they wanted to question him as “a person of interest” about the murder of fellow American Gregory Faull, with whom McAfee had quarreled.

McAfee smuggled himself and his girlfriend, Samantha, across the porous land border that Belize shares with Guatemala. He stayed at a hotel in a national park before heading for Guatemala City on Monday evening.

“I have no plans much for the future now. The reason I chose Guatemala is two-fold,” McAfee told Reuters by telephone from Guatemala’s Supreme Court, flanked by his lawyer, former attorney general and lawyer Telesforo Guerra.

“It is a country bordering Belize, it is a country that understands the corruption within Belize and most importantly, the former attorney general of the country is Samantha’s uncle and I knew that he would assist us with legal proceedings.”

McAfee has denied involvement in the murder and told Reuters on Monday he would not turn himself in. He posted repeatedly on his blog www.whoismcafee.com while on the run, describing how he would constantly change his disguise to elude capture.

On Tuesday, he appeared with his hair and goatee died black, and wearing a dark suit and tie – a far cry from the surfer-style blonde hair highlights, shorts and tribal-tattooed bare shoulders he sported in Belize.

“(Guerra) is now attempting to get political asylum for myself and for Sam. I don’t think there will be much of a problem. From here I can speak freely and safely,” McAfee said.

TECH GENIUS, “BONKERS”

McAfee says he believes authorities in Belize would kill him if he turned himself in for questioning. Belize’s prime minister has denied the claim and called the 67-year-old paranoid and “bonkers.”

On the Caribbean island of Ambergris Caye, where McAfee has lived for about four years, residents say he is eccentric, impulsive, erratic and at times unstable, with a penchant for guns and young women.

He would often be seen with armed bodyguards, pistols tucked into his belt, and McAfee’s neighbor had complained about the loud barking of dogs that guarded his exclusive beachside compound.

His run-in with authorities in Belize is a world away from a successful life in the United States, where he started McAfee Associates in 1989 and made millions of dollars developing the Internet anti-virus software that carries his name.

There was already a case against McAfee in Belize for possession of illegal firearms, and police had previously raided his property on suspicion he was running a lab to make illegal synthetic narcotics.

McAfee says he has been persecuted for refusing to donate money to politicians, that he loves Belize, and considers it his home.

Guatemala is a canny choice to seek refuge. It has long been embroiled in a territorial dispute with Belize. Guatemala claims the southern half of Belize and all of its islands, or cayes, rightfully belong to it. There is no extradition treaty between the two countries.

A Guatemalan government source said there was “no reason” to detain McAfee because there was no legal case against him pending in the country.

Harold Caballeros, Guatemala’s foreign minister, said his government was unaware of any arrest warrant and would study McAfee’s asylum request once presented, saying its success would “depend on the arguments.”

Guerra told Reuters McAfee would return to Belize once his situation in Guatemala was made legal, citing the fact he had crossed into the country illegally to avoid capture by police in Belize.

“He can go to the United States, there is no problem with that,” he added. “We have asked the U.S. embassy for support with our (asylum) request.”

He said the asylum request would be formally presented on Wednesday.

The U.S. Embassy in Guatemala City said in a statement McAfee would have to work within the country’s legal framework, but declined to elaborate. “The embassy does not comment on the actions of American citizens, due to privacy considerations.”

(Reporting by Simon Gardner and Gabriel Stargardter; Editing by Kieran Murray and Eric Walsh)

Internet News Headlines – Yahoo! News

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Kate's Pregnant! How the Queen Found Out

By Michelle Tauber

12/05/2012 at 08:00 AM EST

They're having a baby! Now what?

With the big news that Prince William and Kate, both 30, are expecting their first child, friends and family greeted the announcement with joy – and caution.

The Duchess of Cambridge remains hospitalized with a severe form of morning sickness.

"There is a real excitement," a royal source tells PEOPLE in this week's cover story, "but obviously people are anxious about the Duchess."

The couple had hoped to keep the news secret until at least Christmas, but Kate's illness prompted them to reveal it early.

Palace sources say William informed the Queen, his father, Prince Charles, and his brother Prince Harry – the British Army captain is currently stationed in Afghanistan – before his wife was hospitalized Monday, with friends only hearing the announcement when it went public.

Not surprisingly, the pair timed the pregnancy so as not to overshadow the Queen's Diamond Jubilee, nor to disrupt a major foreign tour.

"I don't think anything is left to chance," says Majesty editor Ingrid Seward. "Kate is probably one of the most organized [royal] women we've ever known."

For much more on the royal pregnancy, including the couple's plans for a nanny, baby names and royal maternity fashions through the years, pick up this week's PEOPLE, on newsstands Friday

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Study: Drug coverage to vary under health law

WASHINGTON (AP) — A new study says basic prescription drug coverage could vary dramatically from state to state under President Barack Obama's health care overhaul.

That's because states get to set benefits for private health plans that will be offered starting in 2014 through new insurance exchanges.

The study out Tuesday from the market analysis firm Avalere Health found that some states will require coverage of virtually all FDA-approved drugs, while others will only require coverage of about half of medications.

Consumers will still have access to essential medications, but some may not have as much choice.

Connecticut, Virginia and Arizona will be among the states with the most generous coverage, while California, Minnesota and North Carolina will be among states with the most limited.

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Online:

Avalere Health: http://tinyurl.com/d3b3hfv

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Stock futures up as China fuels growth hopes; data on tap

NEW YORK (Reuters) - Stock futures rose on Wednesday after comments from China's new leader boosted global growth expectations.

* Chinese Communist Party chief Xi Jinping said the country would maintain its fine-tuning of economic policies in 2013 to ensure stable economic growth. That sparked a rally in Chinese shares, with the Shanghai Composite Index <.ssec> surging 2.9 percent.

* Among his key priorities, Xi listed tax reform, urbanization and allowing the market to play a bigger role in setting resource prices.

* On the domestic front, investors awaited ADP's November employment report, due at 8:15 a.m. ET (1315 GMT). Economists in a Reuters survey expect 125,000 jobs were created versus 158,000 in October.

* Other data due include factory orders and ISM's November non-manufacturing index, both at 10:00 a.m. ET (1500 GMT).

* Nokia is to partner with China Mobile , the world's biggest operator, to launch a version of its flagship Lumia smartphone tailored for the world's largest market. U.S.-listed shares of Nokia rose 2.9 percent to $3.54 in premarket trading.

* S&P 500 futures rose 3.7 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 41 points, and Nasdaq 100 futures added 2.25 points.

* Repsol filed a U.S. lawsuit to block Chevron Corp's deal with Argentina's YPF , ramping up the Spanish oil company's legal response to the loss of its assets in Argentina.

* Pandora Media Inc

lowered its fourth-quarter earnings forecast, blaming a pull-back by advertisers on concerns about the U.S. budget, but analysts suggested it was due more to increasing competition.

* The U.S. Senate on Tuesday voted 98-0 to approve a wide-ranging defense bill that authorizes $631.4 billion in funding for the U.S. military, the war in Afghanistan and nuclear weapons.

* Walt Disney gave a much needed boost to Netflix , becoming the first major Hollywood studio to use the video service to bypass premium channels like HBO that traditionally controlled the delivery of movies to TV subscribers.

* The U.S. securities regulator is investigating a $10 million stock sale in March by Steven Fishman, chief executive of close-out retailer Big Lots Inc , who announced his retirement on Tuesday, the Wall Street Journal reported, citing a person familiar with the inquiry.

* U.S. stocks finished slightly lower in quiet trading Tuesday as the back-and-forth wrangling over the U.S. budget gave investors little reason to act.

(Editing by Bernadette Baum)

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Confrontation between rival protesters looms in Egypt crisis

CAIRO (Reuters) - Egypt's Muslim Brotherhood called for a rally backing President Mohamed Mursi outside his palace on Wednesday and leftists planned a counter-demonstration, raising fears of clashes in a crisis over a disputed push for a new constitution.

Mursi returned to work at his compound a day after it came under siege from opposition protesters furious at his drive to ratify a new constitution in a snap referendum set for December 15 after temporarily expanding his powers by decree.

The Islamist president said he acted to prevent courts still full of appointees from the era of autocratic predecessor Hosni Mubarak from derailing the draft constitution meant to complete a political transition in the Arab world's most populous state.

The Brotherhood, from which Mursi emerged to narrowly win a free election in June, summoned supporters to a demonstration outside the palace in response to what it termed "oppressive abuses" by opposition parties.

Brotherhood spokesman Mahmoud Ghozlan was quoted on its Facebook page as saying opposition groups "imagined they could shake legitimacy or impose their views by force".

Leftist opposition leader Hamdeen Sabahy promptly urged his supporters to go to the streets as well, heightening the chances of confrontation between Islamists and their opponents.

A spokeswoman for Sabahy's Popular Current movement asked protesters to head to the palace to reinforce those still camped out there after Tuesday evening's protests, in which officials said 35 protesters and 40 police were wounded.

Although they fired tear gas when protesters broke through barricades to reach the palace walls, riot police appeared to handle those disturbances with restraint.

About 200 protesters camped out overnight, blocking one gate to the palace in northern Cairo, but traffic was flowing normally and riot police had been withdrawn.

"Our demands to the president: retract the presidential decree and cancel the referendum on the constitution," read a placard hung by demonstrators on a palace gate.

The rest of the Egyptian capital was calm, despite the political furor over Mursi's November 22 decree handing himself wide powers and shielding his decisions from judicial oversight.

Crowds had gathered on Tuesday for what organizers dubbed a "last warning" to Mursi. "The people want the downfall of the regime," they chanted, roaring the signature slogan of last year's uprising that ousted Mubarak.

But the "last warning" may turn out to be one of the last gasps for a disparate opposition that has little chance of stopping next week's vote on a constitution drafted over six months and swiftly approved by an Islamist-dominated assembly.

MURSI STANDS HIS GROUND

Facing the gravest crisis of his six-month-old tenure, the Islamist president has shown no sign of buckling under pressure, confident that the Muslim Brotherhood and its Islamist allies can win the referendum and a parliamentary election to follow.

Many Egyptians yearn for an end to political upheaval that has scared off investors and tourists, damaging the economy.

Ahmed Kamel, spokesman for the Congress Party led by former Arab League chief Amr Moussa, said Mursi should meet opposition demands, not call for an Islamist counter-demonstration.

Some protesters have already gone beyond opposition calls for Mursi to scrap his decree, defer the referendum and set up a "representative committee" to revise the draft constitution, instead demanding the president's overthrow.

"The demands of the street are moving faster than those of the politicians," said Elijah Zarwan, a fellow with the European Council on Foreign Relations. "Now is the time for the Egyptian liberals to negotiate without conditions."

COURT PROTEST

Dozens of pro-Mursi demonstrators, watched by equal numbers of police, waved flags outside the Supreme Constitutional Court, whose rulings have complicated the Islamists' rise to power.

"You are not a political agency," read one banner held by the demonstrators, addressing a court that in June ordered the dissolution of the Islamist-led lower house of parliament.

Mursi issued his decree temporarily putting his actions above the law to forestall any court ruling to dissolve the upper house or the assembly that wrote the constitution.

State institutions, with the partial exception of the judiciary, have mostly fallen in behind Mursi.

The army, the power behind all previous Egyptian presidents in the republic's six-decade history, has gone back to barracks, having apparently lost its appetite to intervene in politics.

In a bold move, Mursi sacked Mohamed Hussein Tantawi, the Mubarak-era army commander and defense minister, in August and removed the sweeping powers that the military council which took over after Mubarak's fall had grabbed two months earlier.

The liberals, leftists, Christians, ex-Mubarak followers and others opposed to Mursi, elected in a close result against a secular rival, have yet to generate a mass movement or a grassroots political base to challenge the Brotherhood.

Protesters have scrawled "leave" over Mursi's palace walls, but the president has made clear he is not going anywhere.

"The crisis we have suffered for two weeks is on its way to an end, and very soon, God willing," Saad al-Katatni, head of the Brotherhood's Freedom and Justice Party, told Reuters.

Investors have seized on hopes that Egypt's turbulent transition, which has buffeted the economy for two years, may soon head for calmer waters, sending stocks 1.6 per cent higher after a 3.5 percent rally on Tuesday.

The most populous Arab nation has turned to the IMF for a $4.8 billion loan to help it out of a crisis that has depleted its foreign currency reserves.

The government said on Wednesday the process was on track and Egypt's request would go to the IMF board as expected.

(Additional reporting by Tom Perry and Yasmine Saleh; Writing by Alistair Lyon; Editing by Mark Heinrich)

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Yahoo sees several flaws in $2.7 billion Mexico ruling: source

SAN FRANCISCO (Reuters) – Yahoo Inc believes it has “numerous” grounds to appeal a Mexico City civil court‘s $ 2.7 billion preliminary judgment against the company, including both errors in procedure and in application of law, a person familiar with the matter told Reuters on Monday.

The ruling in the case, which involves allegations of breach of contract related to an online yellow pages listings service, was made by the 49th Civil Court of the Federal District of Mexico City, Yahoo said on Friday.

The case has perplexed many investors and tech-industry observers since Yahoo disclosed it, particularly given the large value of the “non-final” judgment.

The lawsuit was brought by Worldwide Directories S.A. de C.V. and Ideas Interactivas S.A. de C.V. against Yahoo and Yahoo de Mexico, Yahoo said.

The companies could not be reached for comment, although Carlos Bazan-Canabal, who describes himself as a founder of Worldwide Directories, told Reuters via email that he had contracted a U.S.-based law firm to handle the Yahoo case.

He declined to comment further on the matter.

Bazan-Canabal operates a number of web sites. He said on one that he joined Yahoo in 1999, adding that he is a former executive of Yahoo Mexico, and that he helped to launch that company. Yahoo could not immediately be reached for comment on this.

The details of the suit remained unclear on Monday. Documents from local courts in Mexico are not available for public consultation. Yahoo declined to comment.

Yahoo signed a commercial relationship with the two companies in 2002, the person familiar with the matter said. Yahoo terminated the relationship with the companies in 2009, the person said.

Yahoo’s appeal is expected to be heard by a panel of three judges in a superior court in Mexico City, the person said who was not authorized to speak publicly on the matter. It was not clear when Yahoo might file its appeal.

Yahoo’s most recent 10Q filing, which lists major ongoing legal proceedings, makes no mention of the lawsuit.

“We believe the $ 2.7 billion figure appears high based on the seemingly small size of Yahoo’s business in Mexico, but we believe shares could trade off modestly on the news,” wrote JP Morgan analyst Doug Anmuth in a note to investors following Friday’s announcement.

“It’s not clear how the Mexican court arrived at the $ 2.7 billion figure, but it would represent 40 percent of our projected 2012 year-end cash balance for Yahoo,” and equate to about $ 2.30 per share, he wrote.

Shares of Yahoo closed Monday’s regular session down 1.2 percent, or 22 cents, at $ 18.55.

(Additional reporting by Dave Graham in Mexico City and Sarah McBride in San Francisco; Editing by Bernard Orr)

Tech News Headlines – Yahoo! News

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Prince Harry Moves Down the Line of Succession with Royal Baby

By Maggie Coughlan

12/04/2012 at 08:00 AM EST

Saved by the baby!

With news the Duke and Duchess of Cambridge are expecting their first child, uncle-to-be Prince Harry must be thrilled – for a number of reasons.

Once the child is born, Harry – who is in Afghanistan serving with the British army – gets bumped down the line of succession to the throne.

Following the currently reigning monarch Queen Elizabeth, the next in line is Prince Charles, followed by Prince William and then Harry. But with the birth of a baby – regardless of its sex – succession will go from Prince William to his heir and then to Harry.

Harry – whose antics have landed him in hot water with the public and the Palace before – may welcome the chance to step away from the spotlight.

Perhaps the 28-year-old – who has been romantically linked to pop singers and models – will focus on finding love. He told Katie Couric last May that he "longed for kids since he was very, very young" and was "waiting to find the right person, someone who's willing to take on the job."

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Fossil fuel subsidies in focus at climate talks

DOHA, Qatar (AP) — Hassan al-Kubaisi considers it a gift from above that drivers in oil- and gas-rich Qatar only have to pay $1 per gallon at the pump.

"Thank God that our country is an oil producer and the price of gasoline is one of the lowest," al-Kubaisi said, filling up his Toyota Land Cruiser at a gas station in Doha. "God has given us a blessing."

To those looking for a global response to climate change, it's more like a curse.

Qatar — the host of U.N. climate talks that entered their final week Monday — is among dozens of countries that keep gas prices artificially low through subsidies that exceeded $500 billion globally last year. Renewable energy worldwide received six times less support — an imbalance that is just starting to earn attention in the divisive negotiations on curbing the carbon emissions blamed for heating the planet.

"We need to stop funding the problem, and start funding the solution," said Steve Kretzmann, of Oil Change International, an advocacy group for clean energy.

His group presented research Monday showing that in addition to the fuel subsidies in developing countries, rich nations in 2011 gave more than $58 billion in tax breaks and other production subsidies to the fossil fuel industry. The U.S. figure was $13 billion.

The Paris-based Organization for Economic Cooperation and Development has calculated that removing fossil fuel subsidies could reduce carbon emissions by more than 10 percent by 2050.

Yet the argument is just recently gaining traction in climate negotiations, which in two decades have failed to halt the rising temperatures that are melting Arctic ice, raising sea levels and shifting weather patterns with impacts on droughts and floods.

In Doha, the talks have been slowed by wrangling over financial aid to help poor countries cope with global warming and how to divide carbon emissions rights until 2020 when a new planned climate treaty is supposed to enter force. Calls are now intensifying to include fossil fuel subsidies as a key part of the discussion.

"I think it is manifestly clear ... that this is a massive missing piece of the climate change jigsaw puzzle," said Tim Groser, New Zealand's minister for climate change.

He is spearheading an initiative backed by Scandinavian countries and some developing countries to put fuel subsidies on the agenda in various forums, citing the U.N. talks as a "natural home" for the debate.

The G-20 called for their elimination in 2009, and the issue also came up at the U.N. earth summit in Rio de Janeiro earlier this year. Frustrated that not much has happened since, European Union climate commissioner Connie Hedegaard said Monday she planned to raise the issue with environment ministers on the sidelines of the talks in Doha.

Many developing countries are positive toward phasing out fossil fuel subsidies, not just to protect the climate but to balance budgets. Subsidies introduced as a form of welfare benefit decades ago have become an increasing burden to many countries as oil prices soar.

"We are reviewing the subsidy periodically in the context of the total economy for Qatar," the tiny Persian gulf country's energy minister, Mohammed bin Saleh al-Sada, told reporters Monday.

Qatar's National Development Strategy 2011-2016 states it more bluntly, saying fuel subsides are "at odds with the aspirations" and sustainability objectives of the wealthy emirate.

The problem is that getting rid of them comes with a heavy political price.

When Jordan raised fuel prices last month, angry crowds poured into the streets, torching police cars, government offices and private banks in the most sustained protests to hit the country since the start of the Arab unrest. One person was killed and 75 others were injured in the violence.

Nigeria, Indonesia, India and Sudan have also seen violent protests this year as governments tried to bring fuel prices closer to market rates.

Iran has used a phased approach to lift fuel subsidies over the past several years, but its pump prices remain among the cheapest in the world.

"People perceive it as something that the government is taking away from them," said Kretzmann. "The trick is we need to do it in a way that doesn't harm the poor."

The International Energy Agency found in 2010 that fuel subsidies are not an effective measure against poverty because only 8 percent of such subsidies reached the bottom 20 percent of income earners.

The IEA, which only looked at consumption subsidies, this year said they "remain most prevalent in the Middle East and North Africa, where momentum toward their reform appears to have been lost."

In the U.S., environmental groups say fossil fuel subsidies include tax breaks, the foreign tax credit and the credit for production of nonconventional fuels.

Industry groups, like the Independent Petroleum Association of America, are against removing such support, saying that would harm smaller companies, rather than the big oil giants.

In Doha, Mohammed Adow, a climate activist with Christian Aid, called all fuel subsidies "reckless and dangerous," but described removing subsidies on the production side as "low-hanging fruit" for governments if they are serious about dealing with climate change.

"It's going to oil and coal companies that don't need it in the first place," he said.

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Associated Press writers Abdullah Rebhy in Doha, Qatar, and Brian Murphy in Dubai, United Arab Emirates, contributed to this report

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Karl Ritter can be reached at www.twitter.com/karl_ritter

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Stock futures signal slightly higher open

NEW YORK (Reuters) - Stock futures edged up in low volume on Tuesday as the market continues to be hostage to negotiations in Washington on how to avert a "fiscal cliff" that could push the U.S. economy into recession.

* Congress Republicans proposed steep spending cuts on Monday but gave no ground on President Barack Obama's call to raise taxes, and the proposal was dismissed by the White House.

* Headlines about the negotiations have dominated market action of late, with many expecting Congress to come up with a deal that could trigger a rally in equities.

* Coach became the latest company to advance the date of its next dividend payment. Expectations of higher taxes on dividends kicking in next year have pushed many companies to pay special dividends this year or advance their next pay back to investors.

* S&P 500 futures rose 1.2 points and were slightly above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 10 points, and Nasdaq 100 futures added 4.5 points.

* A light data calendar for Tuesday includes the Institute for Supply Management-New York release of its November index of regional business activity at 9:45 a.m. (1445 GMT).

* Cerberus Capital Management is in talks to join Virtu Financial's bid for U.S. brokerage Knight Capital Group , the Wall Street Journal reported, citing people familiar with the discussions. Knight became a takeover target after a trading glitch left it nearly bankrupt earlier his year.

* Shares of Pep Boys-Manny Moe and Jack were down 7.4 percent in light premarket trading a day after the release of the auto parts retailer's results.

* U.S. stocks struggled on Monday to extend the previous week's gains, dropping as disappointing numbers on U.S. factory activity dampened optimism about China's economic growth. The Dow Jones industrial average <.dji> fell 0.46 percent to 12,965.60 at the close. The S&P 500 <.spx> declined 0.47 percent to 1,409.46 and the Nasdaq Composite <.ixic> dropped 0.27 percent, to 3,002.20.

(Reporting by Rodrigo Campos; Editing by Chizu Nomiyama)

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Syrian army pounds Damascus rebel districts

BEIRUT (Reuters) - Syrian government forces bombarded rebel districts near Damascus on Tuesday in a sustained counter-attack to stem rebel gains around President Bashar al-Assad's power base.

The fighting around Damascus has led foreign airlines to suspend flights and prompted the United Nations and European Union to reduce their presence in the capital, adding to a sense that the fight is closing in.

The army fightback came a day after the Syrian foreign ministry spokesman was reported to have defected in a potentially embarrassing blow to the government.

The Syrian Observatory for Human Rights said 200 people were killed across Syria on Monday, more than 60 of them around Damascus. Assad's forces bombarded districts to the south-east of the capital on Tuesday, near to the international airport, and in the rebel bastion of Daraya to the south-west.

In central Damascus, shielded for many months from the full force of a civil war in which 40,000 people have been killed, one resident reported hearing several loud explosions.

"I have heard four or five thunderous blows. It could be barrel bombs," she said, referring to makeshift bombs which activists say Assad's forces have dropped from helicopters on rebel-dominated areas.

The mainly Sunni Muslim rebel forces have made advances in recent weeks, seizing military bases, including some close to Damascus, from forces loyal to Assad, who is from Syria's Alawite minority linked to Shi'ite Islam.

Faced with creeping rebel gains across the north and east of the country, and the growing challenge around the capital, Assad has increasingly resorted to air strikes against the insurgents.

Amid talk that troops had also moved chemical weapons, U.S. President Barack Obama again warned Assad against using them.

The Foreign Ministry in Damascus said on Monday it would never use chemical weapons against Syrians. The statement was issued by an unnamed ministry source after the disappearance of spokesman Jihad Makdissi.

A diplomat in the Middle East said Makdissi had left the country and defected, while the British-based Observatory said it had information that he flew from Beirut on Monday afternoon heading for London.

In Beirut, a diplomat said Lebanese officials had confirmed that Makdissi spent several days in Beirut before leaving on Monday, but could not confirm his destination.

"We're aware of reports that he has defected and may be coming to the UK. We're seeking clarification," a Foreign Office spokeswoman in London said.

Makdissi was the public face to the outside world of Assad's government as it battled the 20-month-old uprising. But he had barely appeared in public for several weeks before Monday's report of his defection.

He had little influence in a system largely run by the security apparatus and the military. But Assad's opponents will see the loss of such a high profile figure, if confirmed, as further evidence of a system crumbling from within.

UN, EU REDUCE PRESENCE

The United Nations and European Union both said they were reducing their presence in Syria in response to the escalated violence around the capital.

A spokesman for U.N. humanitarian operations said the move would not stop aid deliveries to areas which remained accessible to relief convoys.

"U.N.-funded aid supplies delivered through SARC (Syrian Arab Red Crescent) and other charities are still moving daily where the roads are open," Jens Laerke told Reuters in Geneva.

"We have not suspended our operation, we are reducing the non-essential international staff."

Three remaining international staff at the European Union delegation, who stayed on in Damascus after the departure of most Western envoys, crossed the border into Lebanon on Tuesday after pulling out of the Syrian capital.

An EU official said they would move to Brussels or Beirut.

The Syrian army appears to have focused most of its energy on Damascus, where rebels have been planning to push into the capital from the surrounding suburbs.

Neither side appears to have the upper hand in the fighting and a previous attempt by rebels last July to hold ground in the city was crushed as the fighters fell back into the suburbs and nearby countryside.

Clashes continued around Damascus International Airport and along the airport highway, which has become an on-and-off battleground that forced foreign airlines to suspend flights to Damascus since Thursday evening.

EgyptAir, which tried to resume flights on Monday, had to call back a plane headed to Damascus due to the "bad security situation" around the airport, an airline official said.

Media reports citing European and U.S. officials said Syria's chemical weapons had been moved and could be prepared for use in response - a fear raised by the opposition.

White House spokesman Jay Carney said U.S. concerns about Syria's intentions regarding the use of chemical weapons were increasing, prompting Washington to make contingency plans.

Obama, who has steered clear of repeating in Syria the kind of military engagements Washington has seen in Iraq, Afghanistan or Libya, later repeated a warning to Assad - vaguely worded - against using chemical weapons to keep himself in power:

"The world is watching," Obama said. "The use of chemical weapons is and would be totally unacceptable and if you make the tragic mistake of using these weapons there will be consequences and you will be held accountable."

(Additional reporting by Khaled Yacoub Oweis in Cairo, Erika Solomon in Beirut, Mohammed Abbas in London, and Stephanie Nebehay in Geneva; Editing by Giles Elgood)

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